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SEC should have been on Madoff

February 5, 2009
The Daily Mining Gazette

We hope every member of Congress shares the reaction of Sen. Richard Shelby, R-Ala., to the Securities and Exchange Commission's excuse for not stopping Bernard Madoff before he fleeced thousands of people of billions of dollars.

Madoff is the Wall Street high roller who may have operated the biggest pyramid scheme in history. Investigators say he used it to defraud investors of as much as $50 billion.

But the SEC had heard warnings about Madoff for years before he finally was arrested a few weeks ago. Why didn't the agency shut him down previously?

Last week, members of a Senate panel heard testimony from Linda Thomsen, who is the SEC's enforcement director. She said the agency is "committed" to improving its fraud detection programs. Where have we heard that before?

"While we always do our utmost to do more with less, if we have more resources, we could clearly do more," Thomsen told the senators.

That prompted Shelby to respond that when federal regulators fail, their standard excuse "is to cry lack of resources."

Indeed it is - but there is no reason to believe that "more resources" would have made a difference in the Madoff fiasco. What happened, clearly, is that SEC officials received warnings about Madoff - and failed to do anything about them.

Too often in government, failure is rewarded. Agencies that don't do their jobs plea for more money - and Congress provides it. This time needs to be different. Congress should insist on answers, not excuses from the SEC. Then action needs to be taken to ensure that the next Madoff is caught before he defrauds Americans of $50 billion.



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